Elon Musk Admits Mistakes Were Made on the Road to Tesla’s Model 3

If there's one thing Tesla's CEO is comfortable with, it's admitting when he makes a mistake. For the second year in a row, Elon Musk used the Tesla shareholder meeting Tuesday as a platform to confess the errors his electric car and energy company had committed in the past—and how he planned to avoid them in the future.

Tesla (TSLA, +2.15%) is on track to deliver the first orders of its Model 3 lower-priced sedan in July, but customers should not expect to have as many bell-and-whistle options to choose from as were available with previous Tesla cars. In fact, Model 3 buyers will only have two options for customizing the car at first: the color and the size of the wheels, Musk said.

The CEO said he made the decision to significantly pare down the configurations for the Model 3—Tesla's most affordable vehicle yet, starting at $35,000—after learning from mistakes he made with Tesla's SUV known as the Model X, which Musk called "hubris extraordinaire."

"The big mistake we made with the X, which primarily was my responsibility, was having way too much complexity right at the beginning. That was very foolish," Musk said.

"It had way too many cool things in it that really should have been rolled in with version 2, version 3," he continued. "We got overconfident and created something great that probably will never be made again, and perhaps should not be."

Meanwhile, the rollout of the Model S, which came with just one configuration when production began, had been smoother, Musk recalled—though he said it had not been a strategic decision, but rather all Tesla was capable of delivering at the time.

Learning from that experience, Musk had initially considered offering a dual motor for all-wheel drive as opposed to just a single motor on the Model 3, but decided against it because it would have "doubled the probability of something going wrong," he said. ("We’ll get to the other configurations later, as soon as we get configuration one right," he added, noting that he expects to be able to offer the dual motor by the end of 2017 or early 2018.) Likewise, Musk is also aiming to simplify Tesla's supply chain so that it is not so widely spread across the globe, which exposes it to "so much risk from earth."

Another misstep Tesla made was building the Model X SUV too much in the image of the Model S sedan, when the company should have started from scratch to avoid stumbling blocks in the design process.

"We made a mistake in trying to derive the Model X from the Model S platform—it would have been better to just design an SUV the way an SUV should be designed," Musk said. "Otherwise, you just try to shoehorn something that doesn’t make sense." Because of that, he said, Tesla is designing its forthcoming Model Y semi-truck completely independently from its past vehicles, even though critics have suggested it should be more similar to the Model 3.

Musk also made some more personal confessions at Tesla's shareholder meeting, suggesting he sometimes unwinds by taking insomnia drug Ambien and drinking wine, among other habits.